Marc Crady: Thanks Brad. Yes, the downgrade was not a surprise. As Brad mentioned, as our telecom portfolio seasons, we’re expecting additional downgrades in the future. This was the only one we downgraded this quarter in telecom though I will note. The borrower is a large telecommunications business. The Company had weaker than expected operating results in the quarter, increasing leverage. There’s some large debt maturities that are coming in 2025 and some other kind of secular challenges in the telecom industry. So, I wouldn’t say it’s sort of out of the ordinary or unexpected and I guess what we’ll expect in the future.
Brendan McCarthy: So probably fair to say that just kind of given the shift towards some of the higher spread businesses in rural infrastructure finance. Would you — is it fair to say just maybe we might expect a higher degree of provision for losses over the next one to two years?
Brad Nordholm: I won’t predict that that we will have higher provisions for losses in the next couple years, but I think we will have more credit stories that we’ll be working on in corporate agribusiness, telco, don’t know about renewable energy. And compared to Farm & Ranch and rural ag cooperative business in the past, there’ll be incrementally more of those, but we are absolutely confident that we’re getting compensated for the risk and that we have the ability to manage these risks. In the allowance, it may occasionally show up, but you’re also going to see it in the profitability.
Aparna Ramesh: And Brendan, I would also say that we’ve got a very robust capital position well in excess of our regulatory requirements. Overall, the balance sheet is very well positioned to handle any steps.
Brendan McCarthy: And then one more question for me, just I know last quarter we talked about some changes to the ag expressed, underwriting standards, I believe it was loosen the loan to value provisions a bit. But just wondering if there was a noticeable increase in volume kind of directly attributed to that change from last quarter?
Brad Nordholm: Yes. I think we can pretty well quantify the percentage increase in the number of overall applications that now qualify for ag expressed, but Zack, can you offer some color on that?
Zack Carpenter: Yes, great question and we’re very excited about that product enhancement. Unfortunately, I think the biggest headwind in that space is the higher interest rates. So regardless of product, I think that’s just been sticker shock over the last 12 to 18 months, which really slowdown or basically stop the refinancing market in this space. So that being said, I think what’s the positive story here is the percentage of new loan applications coming through our platform is much higher in the ag expressed space than it ever has been in the past. Meeting this product has been much more competitive and much more of a positive reaction in the market. So as a total compensation of all loan applications it’s shifting more towards AgExpress.
And as we believe as borrowers get more accustomed to this higher rate environment and see new purchase opportunities and/or start to refinance over the next couple of years that this product will drive increased interest and even a higher concentration or composition in our total applications.
Brad Nordholm: Zack, did I say something there that it’s now approaching 70% by number of applications?
Zack Carpenter: 60% to 70% depending on the month, yes.
Brad Nordholm: Yes, and keep in mind that was zero or four years ago.
Zack Carpenter: That’s right.
Operator: The next question comes from Gary Gordon, a Private Investor. Please go ahead.
Unidentified Analyst: Two questions. One is the large percentage of your new business that’s wholesale, what is that? Is this sort of a one-off? Or does this say something about the stresses on the banking system?
Brad Nordholm: Yes. Gary, this actually is a really positive story that I’m going to have Zack share with you. But in addition to exactly what’s going on right now and driving the growth, I want to just go back and also link this to earlier discussion about NES and talk for just a moment about what has been an evolution of pricing philosophy here at Farmer Mac over the last four to five years. Going back four or five years ago, we kind of calculated what’s the minimum return we need? And that was our price. And today we pay attention to that, but we also pay attention to where’s the market? And what alternatives do customers have? And what does it take for us to capture market share? And is that market share profitable? And what you saw over the last couple of years is our deliberate decision not to chase business that wasn’t profitable and a lot of that was the wholesale business.
And now we’re seeing an absolute reversal of that, and so we’re being opportunistic. So, I really want to emphasize that thinking about pricing not as a minimum of what do we need here at Farmer Mac, but what is their compensation for the risk and in the market price and what can we take from the marketplace while fulfilling our mission is driving much more of what we do now.
Zack Carpenter: Yes. Gary, Zack Carpenter. Great question and we’re very excited about the potential outlook, in this space. And going back in history, about three years ago, we had a couple of counterparties and we’ve had them for a long time. What we didn’t have was the right people and the right mindset in place to really go out and get our brand in the market to see what opportunities are available. And I think over the last two to three years, we’ve developed that personnel in house and that talent to really get out there and understand and make sure our brand is resonating. I think the second thing is why strong opportunities now? Part of it is the market. So layer in the strong individual brand that we have internally to get out there and call on the right people, we’re also very strong relative value in the market.
